MARKET REPORT: Pharma on a high after GSK lung treatment is approved by US drug regulators

Investors dosed up with GlaxoSmith-Kline on hearing that advisers to the US Food & Drug Administration had recommended that its experimental treatment for smoking-related lung damage, Breo Ellipta, be approved to treat a lung disorder. Shares of the drugs giant soared to an 11-year peak of 1681p before closing 51p better at 1658p.

The positive panel vote means that a broad label approval for the once-daily inhaled treatment, which was developed to treat chronic obstructive pulmonary disorder, could be imminent. The FDA will decide whether to give full approval by May 12.

Broker Deutsche Bank has estimated that sales of Breo in the US would reach £300million by 2016. Rival Sanford C Bernstein has suggested that sales could top £703million in 2020.

After seemingly years of underperformance, GSK has at last come into its own. Fund managers have cottoned on to the fact that it has arguably the best pipeline of any European drugs company with 14 Phase III assets in 2013 and 2014.

Buyers also chased rival drugs company AstraZeneca 38p to 3335.5p on consideration of its defensive qualities. However, there are still some prominent City figures out there who believe that GlaxoSmithKline should climb into bed with AstraZeneca to create the European pharmaceutical champion. GSK’s boss Sir Andrew Witty is known to be a bit of a wheeler-dealer, so we should never say never.

The Footsie had rallied 33 points before it retreated late in sympathy with Wall Street’s early weakness to finish 0.54 points easier at 6,243.67. Wall Street traded 60 points off at the outset after data showed that future economic activity fell in March for the first time in seven months and the pace of factory activity growth in the mid-Atlantic region unexpectedly slowed.

Already friendless amid fresh doubts about the Cyprus bailout and ongoing political uncertainties in Italy, bank shares succumbed to further selling amid rumours that French bank SocGen was in financial difficulties. Partly UK taxpayer-owned banks Royal Bank of Scotland lost 9.3p to 273.9p and Lloyds Banking Group 1.14p to 47.08p.

Barclays lost 6.55p to 283.75p following news of a top management shake-up which sees Rich Ricci, the controversial head of investment banking, and wealth management boss Tom Kalaris, say cheerio.

Mobile phone giant Vodafone buzzed 3.25p higher to 192.5p after Verizon Communications posted higher-than-expected quarterly profits and chief finance officer Fran Shammo said that it was confident that the British giant could exit their Verizon joint venture without ‘any major tax implications’.

Speculation has been rife in recent weeks that Vodafone could sell its 45 per cent stake in Verizon to its partner, but one major sticking point had been an expected £13billion capital gains tax bill.

African Barrick Gold touched 175.5p after reporting a rise in production and sale of gold in the first quarter. It later succumbed to scrappy selling to close 4.4p off at 165.9p. In the three-month period, gold production was 146,105 ounces compared with 144,643 last year, while sales totalled 148,232 ounces, up on 145,417 in the same quarter in 2012.

Transport group National Express accelerated 4.9p to 196p after Morgan Stanley upgraded to overweight and lifted its target price to 235p from 215p.

Selling on the back of a disappointing first-quarter trading statement dragged Devro 11.6p lower to 324p. Profits for the three months were below the corresponding period in 2012 due to lower production yields. However, the group remains confident of meeting full-year expectations. CSR shed 14.8p to 473.9p after director Chris Ladas sold 68,139 shares at 488.85p a pop. Liberum Capital downgraded to hold following recent strength as it believes core gross margin of 57 per cent is much higher than its peers, and unsustainable.

A bullish operation update on its TGT field in Vietnam helped SOCO International improve 3.4p to 371.9p. Analysts reckon it should to be able to handle volumes of around 70,000 barrels of oil per day.

Europa Oil & Gas gushed 1.5p to 9.62p after tying up a farm-out with leading independent Kosmos Energy for its multi-billion barrel prospects offshore Ireland, an emerging hotspot in the oil and gas sector where ExxonMobil will be drilling a well on Europa’s doorstep. FinnCap upgraded its net asset value by 37.2p to 53.4p and its target price to 26.7p.

Instem, the IT provider to the global healthcare development market, advanced 6p to 107.5p after announcing a strong customer uptake of its latest Provantis (study management software) product release, Provantis 9. One new customer signed up is a leading Chinese government research laboratory.

London-based housebuilder Telford Homes erected a gain of 11p at 258.5p following a positive trading update. The company has experienced a strong demand from overseas investors for London property, although over 60 per cent of homes were still sold to UK buyers. Already 94 per cent of homes have been pre-sold for the year to end-March 2014 and over 50 per cent pre-sold for each of the two following years.

A disappointing third-quarter trading update blew a fuse at software group NCC, 10.25p off at 109p. Broker Northland said the company has been aggressive in its buy-and-build strategy but may pause for breath.